COLLOQUE INTERNATIONAL NOUVELLES TECHNOLOGIES ET POLITIQUE MONÉTAIRE Novembre 2001 INTERNATIONAL SYMPOSIUM NEW TECHNOLOGIES AND MONETARY POLICY November 2001 Preface The international symposium on "new technologies and monetary policy", held in Paris in November 2001 by the Banque de France, built on and furthered thinking on central banking issues. The topic chosen this year underlines the growing complexity of conducting monetary policy in a changing environment. The innovations relating to new information and telecommunications technologies (NICT) constitute a sweeping scientific and technical revolution that represents a major challenge for central banks. The spread of these innovations through the economy, which remains difficult to assess due to a number of uncertainties, may impact on both prices and potential output. The question we are faced with is whether these developments will lead us to change the way in which we perform our two-fold duty of ensuring price and financial stability. By drawing on the experience of academics, institutional investors and a large number of central bankers, the international financial community as a whole has been brought together to study the consequences of new technologies, thus allowing for a productive exchange of points of view. The presentations, discussions and comments in the symposium were extremely rich. I firmly believe that the publication of its proceedings will help to fuel new research in this sensitive and constantly-changing area. Lastly, I would like to extend my deepest thanks to all the speakers from the world over who contributed to the success of this symposium. CONTENTS About the Contributors 151 Symposium Summary 163 Introductory Speech Jean-Claude Trichet, Governor, Banque de France 173 NEW TECHNOLOGIES, RISKS AND GLOBAL PROSPECTS FOR GROWTH AND INFLATION 175 Session chaired by William McDonough, President, Federal Reserve Bank of New York Panel William McDonough 177 Daniel Cohen, Professor, École normale supérieure (Paris) 180 Jacob A. Frenkel, Chairman, Merrill Lynch International 183 Christian Noyer, Vice-President, European Central Bank 188 Jean-Pierre Roth, President, Swiss National Bank 191 Luc Soete, Professor, University of Maastricht 193 NEW TECHNOLOGIES AND THE CONDUCT OF MONETARY POLICY 199 Session chaired by Jacques de Larosière, Honorary Governor, Banque de France Panel Jacques de Larosière 201 Jaime Caruana Lacorte, Governor, Banco de España 203 Hervé Hannoun, Deputy Governor, Banque de France 206 Charles Goodhart, Professor, London School of Economics 209 Arnout H.E.M. Wellink, President, De Nederlandsche Bank 212 Christian de Boissieu, Professor, University of Paris I 215 BANQUE DE FRANCE – Symposium on New Technologies and Monetary Policy 9 FINANCIAL MARKETS, INSTITUTIONS AND MONETARY TRANSMISSION MECHANISMS 219 Session chaired by Michel Camdessus, Honorary Governor, Banque de France Panel Michel Camdessus 221 Edward M. Gramlich, Member of the Board of Governors, Federal Reserve System 229 Otmar Issing, Member of the Executive Board, European Central Bank 236 Axel A. Weber, Professor, University of Frankfurt 240 Daniel Bouton, Chairman and Chief Executive Officer, Société générale 243 John Lipsky, Chief Economist, JP Morgan Investment Bank 246 NEW TECHNOLOGIES, FINANCING ISSUES AND CAPITAL FLOWS 251 Session chaired by Andrew Crockett, General Manager, BIS Panel Leszek Balcerowicz, President, Narodowy Bank Polski 253 Jürgen Stark, Vice-President, Deutsche Bundesbank 255 Charles Konan Banny, Governor, Central Bank of West African States 258 Guillermo Ortiz, Governor, Banco de México 260 Richard Portes, Professor, London Business School 263 Andrew Crockett 269 Concluding Speech William McDonough, President, Federal Reserve Bank of New York 271 Participants 275 10 BANQUE DE FRANCE – Symposium on New Technologies and Monetary Policy THE CONTRIBUTORS About the Contributors Balcerowicz Leszek President of the Narodowy Bank Polski Mr Balcerowicz has been President of the National Bank of Poland since January 2001. In 1970, Mr Balcerowicz graduated from Foreign Trade faculty in Central School of Planning and Statistics (CSPS) in Warsaw. He earned a MBA at St. John’s University in New York (1974) and received a Ph.D. in economics from the CSPS (1975). Since October 1992, Mr Balcerowicz has been a professor at the Warsaw School of Economics, and since 1993, he has been there a Director of Chair of International Comparative Studies. In September 1989, Mr Balcerowicz became Deputy Prime Minister and Minister of Finance. He was also President of the Economic Committee of the Council of Ministers. He retained his positions in the government until December 1991. President of the Freedom Union, between April 1995 and December 2000, Mr Balcerowicz was Deputy Prime Minister, Minister of Finance and President of the Economic Committee of the Council of Ministers from 1997 to June 2000. Banny Charles Konan Governor of the Central Bank of West African States Mr Banny was appointed Governor of the Central Bank of West African States on 1 January 1994 for a six-year term. His mandate was renewed by the Council of Ministers of the West African Monetary Union at its meeting on 17 June 1999, for a six-year period starting from 1 January 2000. Mr Banny holds a post-graduate degree in economic and commercial sciences, which he obtained in 1968 at the École supérieure des sciences économiques et commerciales in Paris. Mr Banny joined the Headquarters of the Central Bank of West African States in 1976. He was successively Director of Administrative and Social Affairs, Central Director of Securities, Investment, Borrowing and Lending in 1977, and Central Director of Research in 1983. In 1986, he became National Director of the Central Bank of West African States for the Côte d’Ivoire, a position he held concurrently with that of Alternate Governor for the Côte d’Ivoire at the International Monetary Fund and of Special Adviser to the Governor of the Central Bank of West African States as from 1988. He held the post of Interim Governor of the Central Bank of West African States from 1990 to 1993. BANQUE DE FRANCE – Symposium on New Technologies and Monetary Policy 151 About the contributors Bouton Daniel Chairman and Chief Executive Officer of Société générale Mr Bouton has been Chairman and CEO of Société générale since November 1997. He graduated from the Institut d’études politiques de Paris and studied at the École nationale d’administration from 1971 to 1973. After having been Inspector of Finance between 1973 and 1977, Mr Bouton joined the Budget Department in 1977 as Special Adviser and then served as Technical Adviser to the chief of staff of the Minister from 1980 to 1981. Between 1981 and 1984, he was Head of Division at the Budget Department and from 1984 to 1986, he served as Assistant Director at the Central Administration of the Ministry of the Economy, Finance and Budget. Mr Bouton was Chief of Staff of Alain Juppé, Minister in charge of the Budget, from 1986 to 1988, Head of the Budget Department between 1988 and 1991 and General Inspector of Finance in 1990. He was appointed Executive Vice President of Société générale inMarch1991and CEO in February 1993. Camdessus Michel Honorary Governor of the Banque de France, former Managing Director of the International Monetary Fund Mr Camdessus assumed office as Managing Director and Chairman of the Executive Board of the International Monetary Fund on 16 January 1987. On 22 May 1996, the Executive Board of the IMF unanimously entrusted him with a third five-year term as Managing Director, starting on 16 January 1997. Mr Camdessus retired from the IMF on 14 February 2000. Mr Camdessus holds postgraduate degrees in political economy and economics from the University of Paris. He is also a graduate of the Institut d’études politiques de Paris and the École nationale d’administration. After being appointed senior civil servant in the French Civil Service, Mr Camdessus joined the Treasury at the Ministry of Finance and Economic Affairs in 1960. From 1966 to 1968, he served as Financial Attaché at the French delegation to the EC in Brussels, then returned to the Treasury where he successively held the posts of Assistant Director in 1971, Deputy Director in 1974 and Director in February 1982. Mr Camdessus also served as Chairman of the Paris Club between 1978 and 1984, and Chairman of the Monetary Committee of the European Economic Community from December 1982 to December 1984. He was appointed Deputy Governor of the Banque de France in August 1984, then Governor in November 1984. He served in this post until his appointment as Managing Director of the IMF. Mr Camdessus had been appointed alternate Governor of the IMF for France in 1983 and Governor of the IMF in 1984. 152 BANQUE DE FRANCE – Symposium on New Technologies and Monetary Policy About the contributors Caruana Lacorte Jaime Governor of the Banco de España Mr Caruana Lacorte is the Governor of the Banco de España and a member of the Governing Council of the European Central Bank, since 2000. Mr Caruana Lacorte is a Telecommunications Engineer from the Universidad Complutense de Madrid (1974). Mr Caruana Lacorte joined the Spanish Ministry of Trade, where he occupied various posts in the Directorate General for Imports, in the Alicante branch office, and in the Spanish Foreign Trade Institute, between 1979 and 1984. He was commercial attaché to the Spanish Commercial Office in New York (1984-1987), Managing Director and chief Executive Officer of Renta 4 (1987-1991), then President of Renta 4, from 1991 to 1996. Between 1996 and 1999, Mr Caruana Lacorte was General Director of the Treasury and Financial Policy, member of the Board of the SEPI (State Holding Company) and the representative for Spain at the Monetary Committee of the European Union. President of the SETE (Euro state company) between 1997 and 1999, Mr Caruana Lacorte served as General Director for Supervision at the Banco de España (1999-2000), before becoming Governor.